Ignoring a P6 tax code notice?

Ignoring a P6 tax code notice?

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If you have a sole director/shareholder client for whom you do personal tax return as well as PAYE, and you receive a P6 tax code notice for the director which is obviously nonsense, what are the consequences of simply ignoring it and going with what you know to be the correct tax code, rather than trying to explain to HMRC why they've issued the wrong code?

Replies (14)

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By SteveHa
14th Dec 2015 11:53

That depends on how far you represent them. If it's payroll only, then you have no discretion. If you represent the director for personal tax (SA etc.) then ring HMRC, explain why it's wrong, and they will correct.

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Time for change
By Time for change
14th Dec 2015 12:52

There is no reason, if asked by the client,

why you shouldn't write to HMRC, setting out why you believe the code to be incorrect.

Even if you are not authorised, you can always ask HMRC to reply direct to your client, or the employee in question.

This is certainly a route I've taken recently, where it was clear that HMRC had plucked information from apparently thin air.

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By whatdoyoumeanwashe
14th Dec 2015 13:23

Thanks for your responses. I know I can write to HMRC, my question is why bother when I could just ignore the p6 and go with the correct tax code? My writing/phoning hmrc seems like a waste of my and HMRCs time in this instance.

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Replying to Arthur Putey:
RLI
By lionofludesch
14th Dec 2015 15:25

Know what you mean but ......

whatdoyoumeanwashe wrote:
Thanks for your responses. I know I can write to HMRC, my question is why bother when I could just ignore the p6 and go with the correct tax code? My writing/phoning hmrc seems like a waste of my and HMRCs time in this instance.

Under RTI they'll know you're using the "wrong" code after next payday which may get the company an "educational visit".  On the one hand, you don't want these people in your office, on the other, it may bring things to a head.

I suppose the answer to your question is that the company may be asked to pay the director's tax if he doesn't.  Which may not bother him.

How much is at stake ?   PAYE is only tax now rather than later - if he's paid too much, he'll get it back when he submits his SA return.

A good compromise might be to use the old code and write in complaining about the new one.  Then at least you can say, "well, I told you but the letter's not been dealt with."

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By adam.arca
14th Dec 2015 13:33

I've ignored them in the past

Pre RTI, I used to ignore P6 notices which I knew to be complete nonsense.

Post RTI, however, I think it's a bit of a sticky wicket best avoided (not that I know there are any specific provisions for not using the right code, rather I would just prefer not to be put in the position of finding out).

Do as the others suggested and speak to the agent helpline. That said, I had the ridiculous situation the other week of a client with some £7k of mileage claim coded in and the helpline wouldn't change it just because the client would prefer to wait and see what his clam will actually be (apparently, any change has to be "accurate" which of course begs the question: how do the Revenue know that coding in an estimate based on last year's figure is more accurate?)

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By whatdoyoumeanwashe
14th Dec 2015 13:46

Thanks Adam, that's exactly where I'm coming from. Just wondered if anyone out there had already put themselves in the position of finding out! Difficult to see what penalty they could apply, provided the tax code used proved to be right, but I don't want to be the guinea pig!

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By SteveHa
14th Dec 2015 14:11

Whilst unlikely to become an issue in your case (since you are confident that the code is wrong and that there will be no under-deduction of tax if the code is not used), you may want to look at http://www.hmrc.gov.uk/manuals/pommanual/PAYE92066.htm which specifically states that the first port of call for HMRC to collect under-deducted tax is the employer, and not the employee. Theoretically, if a P6 is ignored (even with reasonable grounds), and tax is subsequently found to be due (and bear in mind tax after the year end is calculated on total income, and not specific income streams), then the employer could be liable.

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By NewACA
14th Dec 2015 14:25

Good question, shame no one has answered it (post RTI)

Here is a half answer:

I've been doing this in order to get rid of PAYE refunds (that of course HMRC never pays out). The individuals then get the refund via their self-assessments (as they were over-taxed through the payroll), as I've lowered their tax code, to match a previous PAYE overpayment.

I believe this is ok, since fines for errors are based on the underpaid tax due to the error, since lowering a tax code results only in tax "overpaid", not underpaid, I cannot see how any fine/penalty can arise.

I don't imagine HMRC would chase a payroll for what would appear to them as overpaid PAYE.

I haven't done it where the tax code has been increased, so that less via PAYE is paid.

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Replying to johnt27:
By SteveHa
14th Dec 2015 14:59

Good question, shame no one has answered it (post RTI)

NewACA wrote:

Here is a half answer:

Pretty sure that's just re-wording what I posted.

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Replying to Jason Croke:
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By NewACA
14th Dec 2015 16:58

Yes, you did give an answer

For SteLacca

When I started writing my post (in-between work), you answer hadn't appeared yet.

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Chris M
By mr. mischief
14th Dec 2015 18:39

No worries

I've done this pretty much every month since RTI first came in, no problems.  if you call them you wait 20 minutes.  If you write they take 4 months.

Just put through the sensible code and ignore the daft one.

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By Mouse007
14th Dec 2015 18:58

Agree 100% Mr Mischief

We ignore any tax codes that "lack credibility".

I've even gone as far as adjusting for known in year benefits to prevent all sorts of nonsense after the year end when the P11ds go in.

Never had any trouble, and if HMRC dare to complain they will get a blast.

 

 

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By whatdoyoumeanwashe
14th Dec 2015 20:43

Thanks all. Glad to hear some other pragmatists have done this without incident.
I like the idea of using it to clear PAYE overpayments. I waited nine months for one of those once, by which time the company bank account was long closed and strike off proceedings started (wasn't enough of a refund to bother keeping it open forever).

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By hje
14th Dec 2015 22:41

If

you are confident that the coding is incorrect, I'd apply the code you believe is correct, and then send an authorised structured email via the webpage at https://online.hmrc.gov.uk/shortforms/form/P2

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